Since that time the Federal Reserve has been given greater autonomy and power by various acts passed by Congress, so it has become an independent central bank whose decisions do not have to be ratified by the President.The Federal Reserve is run by a board of governors in Washington D.C. and the 12 regional Federal Reserve Banks. When depositors wanted to withdraw money, they would take the banknote to the bank and exchange it for coins. In the United States, state-run banks can also be public banks.
It was then rechartered as the State Bank of Philadelphia.Predictably, for both philosophical and political reasons, Jackson came down against the Bank, calling it “the moneyed monster.” He claimed the Bank was an illegal monopoly, and vowed that if he were re-elected he would not renew the Bank’s charter when it ran out in 1836. Jackson bitterly commented, “The Bank is trying to kill me, but I will kill it!”Some people, however, felt that the Bank, and in particular its president Nicholas Biddle, had too much power to restrict the speculative and potentially profitable business dealings of smaller banks.
French Revolution. To save itself, the Bank refused to extend credit to smaller banks that were also financially in trouble. In theory, the more a bank loaned, the more interest it was owed and the more money it made. Wildcat banks were unable to meet their obligations, which created financial difficulties for their creditors and depositors, and so on throughout the economy. Jackson’s presidential term ended in 1836. Like state banks and the First Bank of the United State, the Second Bank of the United States was privately owned. Clay felt that this would hurt Jackson’s chances for re-election because if Jackson signed the bill and renewed the charter, he would anger his powerful western constituency, which felt economically restrained by the Bank.
Through his policies, Biddle was able to force smaller banks to refrain from excessive printing of banknotes, which was a major contributor to inflation. Additionally, there were many smaller, local banks, most of which were responsible, though some were inclined to overextend credit and put their depositors’ funds at risk. Clay felt that the Second Bank of the United States was an indispensable part of this plan, and he approved the Bank’s now-cautious approach to credit and banking.In addition, many state banks felt that their authority to regulate credit within their state was threatened by a national bank such as the Second Bank of the United States. All federal funds were deposited in the Bank making it a powerful source of investment capital, and its federal charter extended its reach throughout the states and into the frontier. Consequently, public opinion was critical of the Second Bank of the United States in the aftermath of the panic.With the stabilizing influence of the Second Bank of the United States gone, many banks resumed their old habits of overextending credit and printing too many banknotes. Consequently, a bank would have not only the original depositor’s receipts circulating as money but also the banknotes it had loaned, resulting in more banknotes circulating than it had coins to cover them. The Federal Reserve was created by Congress in 1913 with President Woodrow Wilson's signing of the Federal Reserve Act. The State Bank of Maryland persuaded the Maryland Legislature to impose a tax on out-of-state banks, including the Second Bank of the United States. For several years a boom in frontier land values masked the danger to the country, but in 1819 land values declined and many frontier borrowers were unable to make their loan and mortgage payments. Almost immediately, the Bank fell into practices of overextending credit, especially among its western branches, which loaned ten times more banknotes than it had gold and silver on deposit. In order to rein in this printing and lending spree, Jackson had the Treasury issue a Specie Circular—an order to other banks that only specie (metallic gold or silver money) might be used to purchase public land on the frontier. These state-chartered banks were not owned by the state but were privately held.